- Graham Steele, U.S. Treasury official, highlights the potential advantages and privacy concerns of a U.S. Central Bank Digital Currency (CBDC).
- Steele’s endorsement of CBDC comes with a stern warning on striking a balance with anonymity and privacy.
Graham Steele, U.S. Treasury Assistant Secretary for Financial Institutions, recently advocated for the exploration of a retail Central Bank Digital Currency (CBDC) backed by the Federal Reserve. Steele spotlighted the benefits such a digital currency could bring, including providing a safety net during bank runs and bolstering private sector lending.
During a Texas payments conference, Steele underscored the crucial role of privacy and anonymity in the formulation of a U.S. CBDC. He insisted on the importance of incorporating these factors into the blueprint of a digital dollar.
Steele, while discussing the Federal Reserve’s contentious FedNow system and possible CBDC deployment, accentuated the need to uphold privacy and anonymity. He advocated for the investigation of technologies like Privacy Enhancing Technologies (PETs) that could potentially safeguard these aspects in the design of a retail CBDC.
In his address, Steele meticulously weighed the pros and cons of a prospective CBDC, appreciating its ability to stimulate a competitive payments landscape.
According to Steele, a Federal Reserve-backed retail CBDC could potentially be a safer haven for consumers amidst bank runs. It could dampen the risk of destabilizing private-sector lending.
Steele referenced past banking crises and suggested that the availability of non-deposit alternatives outside the conventional banking system could have altered the nature and pace of bank runs. While the U.S. hasn’t conclusively decided on launching a CBDC, a specialized group led by the Treasury is presently assessing the ramifications of introducing a CBDC.
Steele conveyed that this assessment takes into account various policy objectives, including global financial leadership and national security implications.
Steele also voiced support for the Federal Reserve’s FedNow instant payments system as a means of encouraging diverse payment options. Such a system, he proposed, could stimulate choice, competition, and resilience within the payments ecosystem. This dynamic environment, according to Steele, would incentivize the development of innovative payment services and features.
However, FedNow has faced opposition. Presidential contenders Robert F. Kennedy Jr. and Ron DeSantis argue that implementing FedNow could set the stage for a CBDC, giving excessive control to the government.
In contrast, Federal Reserve Board governor Michelle Bowman voiced skepticism in April about the expansive justification for a CBDC. She considers it a challenge to envision its use beyond interbank and wholesale transactions.
